Investment in commercial property in the West Midlands increased by 35 per cent in 2004 to stand at nearly £2 billion, according to a new report from Lambert Smith Hampton and Property Data.
The region remained the fourth out of the 12 most active in the UK in terms of the value of property deals done. It trailed only London, the South-east and Scotland, according to Lambert Smith Hampton's UK Investment Transactions report.
Across the UK there was an overall increase in the value of commercial property transactions of 43 per cent, from £ 29.2 billion in 2003 to £41.8 billion in 2004, the highest ever recorded level.
In addition, the highestquarterly volume of transactions recorded in the UK - £13.9 billion - occurred in the last quarter of 2004.
Mark Rooke, associate director in Lambert Smith Hampton's Birminghambased investment team, said the main focus of investors' attention in the West Midlands was the retail sector, which accounted for 49 per cent (£987 million) of overall purchases. Shopping centre investment accounted for 70 per cent of the retail total, with £ 697 million of property changing hands.
The largest deal was Scottish Widows Investment Partnership's purchase of the 1.1 millin sq ft Kingfisher Shopping Centre in Redditch for £211 million.
Birmingham was the focus of the second and third largest transactions. In second place was Triton Property Fund's purchase of the Pavilions Shopping Centre for £98 million at a net initial yield of 5.5 per cent.
The Belfast Group's purchase of Martineau Place from the Birmingham Alliance (a joint venture between Hammerson, Henderson Global Investors and Land Securities) for £94 million at a net initial yield of 6.4 per cent was third largest.
Almost 40 per cent (£786 million) of all transactions in the region involved Birmingham real estate, with more than half of the transactions in the office sector, and this was the second most favoured sector across the region.
The largest office deal was Anglo Irish Bank's purchase of 1 Colmore Square, Birmingham, from Richardson Barberry Developments for £89.8 millin at a net initial yield of 5.9 per cent.
Mr Rooke added: "Institutional investors were the most active in the West Midlands, buying £888 million of property, as they were in most other regions. Nationally, in the last quarter of 2004 institutions were net investors to the tune of £1 billion.
"With their close links to the region, Irish investors continued to be especially active and again bagged some the most high profile deals in Birmingham.
"However, the Germans started to withdraw from UK property. As a result of a financial crisis among the German open-ended funds, they were responsible for almost £ 500 million of disposals in the final threemonth period of 2004."
Across the UK as a whole, there are also signs of a shift in the balance away from private equity towards institutional buyers, who have been the driving force behind the surge in market activity over the past 12 months.
This is the first time since the late 1970s that there has been such strength of desire by the institutional sector to place property back into the mainstream of their investment thinking.
Terry Corns, chief executive of Lambert Smith Hampton's Birmingham office, said: "The current bull market in property in the UK has shown little sign of easing and - with only one or two exceptions - activity has increased significantly, with the weight of money targeting the market continuing to grow and the spread of investors more diverse than over the previous three years.
"As we approach the end of the first quarter of 2005, there are clearly some concerns that interest rate rises may be back on the agenda and the financial markets have already begun to reflect this."